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FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549



(Mark One)



|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ---------------------------------------------------------------------------------------



For the quarterly period ended March 31, 2003



OR



| ̈ |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ----------------------------------------------------------------------------------------



For the transition period from
                 to



Commission file number 000-31579



HYDRIL COMPANY

(Exact name of registrant as
specified in its charter)



|DELAWARE                                           |  | 95-2777268         
|-------------------------------------------------- |  | -------------------
|(State or other jurisdiction of                    |  | (IRS Employer      
|incorporation or organization)                     |  | Identification No.)
|                                                  
|3300 North Sam Houston Parkway East Houston, Texas |  | 77032-3411         
|(Address of principal executive offices)           |  | (Zip Code)         



Registrants
telephone number, including area code (281) 449-2000



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.



Yes x        No ̈



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes x        No ̈



Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.

Shares outstanding at May 8, 2003:

Common stock, $.50 par value, 15,867,722 shares outstanding

Class B common stock, $.50 par value,6,770,221 shares outstanding



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HYDRIL
COMPANY



INDEX



PART
IFINANCIAL INFORMATION



|Item 1. Financial Statements                                                                       |  | Page
|-------------------------------------------------------------------------------------------------- |  | ----
|Consolidated Balance SheetsMarch 31, 2003 (unaudited) and December 31, 2002                       |  | 3   
|Unaudited Consolidated Statements of OperationsFor the Three Months Ended March 31, 2003 and 2002 |  | 5   
|Unaudited Consolidated Statements of Cash FlowsFor the Three Months Ended March 31, 2003 and 2002 |  | 6   
|Notes to Unaudited Consolidated Financial Statements                                               |  | 7   
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations      |  | 14  
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                                 |  | 30  
|Item 4. Controls and Procedures                                                                    |  | 30  
|                                                                                                  
|PART IIOTHER INFORMATION                                                                         
|                                                                                                  
|Item 6. Exhibits and Reports on Form 8-K                                                           |  | 30  



* * *



Cautionary Statement Regarding Forward-Looking
Information



This quarterly report on Form 10-Q
contains forward-looking statements. These statements relate to future events or our future financial performance, including our business strategy and product development plans, and involve known and unknown risks and uncertainties. These risks and
uncertainties and assumptions, which are more fully described under RISK FACTORS in Item 2 of this report and in Hydril Companys Annual Report on Form 10-K for the year ended December 31, 2002 filed with the Securities and Exchange
Commission, include the impact of oil and gas prices and worldwide economic conditions on drilling activity, and the demand for and pricing of Hydrils products and Hydrils assumptions relating thereto. These factors may cause our
companys or our industrys actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as may, will, should, could, expects, intends, plans, anticipated, believes, estimated,
potential, or the negative of these terms or other comparable terminology.



These statements are only projections, based on anticipated industry activity. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements.





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HYDRIL
COMPANY

Part I, Item 1: Consolidated Balance Sheets

(In Thousands, Except Share and Per Share Information)



|                                                                        |  | March 31, 2003 |          |   | December 31, 2002 |  
|----------------------------------------------------------------------- |  | -------------- | -------- | - | ----------------- | -
|                                                                        |  | (unaudited)    |          |   |                   |  
|CURRENT ASSETS:                                                         |  |                |          |   |                   |  
|Cash and cash equivalents                                               |  | $              | 60,667   |   |                   | $
|Investments                                                             |  |                | 13,498   |   |                   |  
|Receivables:                                                            |  |                |          |   |                   |  
|Trade, less allowance for doubtful accounts: 2003, $1,139; 2002, $1,039 |  |                | 34,888   |   |                   |  
|Contract costs and estimated earnings in excess of billings             |  |                | 8,014    |   |                   |  
|Other                                                                   |  |                | 363      |   |                   |  
|                                                                        |  |                |          |   |                   |  
|Total receivables                                                       |  |                | 43,265   |   |                   |  
|                                                                        |  |                |          |   |                   |  
|Inventories:                                                            |  |                |          |   |                   |  
|Finished goods                                                          |  |                | 20,263   |   |                   |  
|Work-in-process                                                         |  |                | 13,923   |   |                   |  
|Raw Materials                                                           |  |                | 5,708    |   |                   |  
|                                                                        |  |                |          |   |                   |  
|Total inventories                                                       |  |                | 39,894   |   |                   |  
|                                                                        |  |                |          |   |                   |  
|Deferred tax asset                                                      |  |                | 8,896    |   |                   |  
|Other current assets                                                    |  |                | 2,968    |   |                   |  
|                                                                        |  |                |          |   |                   |  
|Total current assets                                                    |  |                | 169,188  |   |                   |  
|                                                                        |  |                |          |   |                   |  
|PROPERTY:                                                               |  |                |          |   |                   |  
|Land and improvements                                                   |  |                | 20,092   |   |                   |  
|Buildings and equipment                                                 |  |                | 51,268   |   |                   |  
|Machinery and equipment                                                 |  |                | 157,728  |   |                   |  
|Construction-in-progress                                                |  |                | 3,466    |   |                   |  
|                                                                        |  |                |          |   |                   |  
|Total                                                                   |  |                | 232,554  |   |                   |  
|Less accumulated depreciation and amortization                          |  |                | (126,516 | ) |                   |  
|                                                                        |  |                |          |   |                   |  
|Property, net                                                           |  |                | 106,038  |   |                   |  
|                                                                        |  |                |          |   |                   |  
|OTHER LONG-TERM ASSETS:                                                 |  |                |          |   |                   |  
|Investments                                                             |  |                |         |   |                   |  
|Other assets                                                            |  |                | 4,935    |   |                   |  
|                                                                        |  |                |          |   |                   |  
|TOTAL                                                                   |  | $              | 280,161  |   |                   | $
|                                                                        |  |                |          |   |                   |  



See notes
to unaudited consolidated financial statements





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HYDRIL
COMPANY

Part I, Item 1: Consolidated Balance Sheets

(In Thousands, Except Share and Per Share Information)



|                                                                                                                                                                                  |  | March 31, 2003 |         |   | December, 31, 2002 |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ------- | - | ------------------ | -
|                                                                                                                                                                                  |  | (unaudited)    |         |   |                    |  
|CURRENT LIABILITIES:                                                                                                                                                              |  |                |         |   |                    |  
|Accounts payable                                                                                                                                                                  |  | $              | 13,701  |   |                    | $
|Billings in excess of contract costs and estimated earnings                                                                                                                       |  |                | 5,203   |   |                    |  
|Accrued liabilities                                                                                                                                                               |  |                | 15,722  |   |                    |  
|Current portion of long-term debt                                                                                                                                                 |  |                | 30,000  |   |                    |  
|Income taxes payable                                                                                                                                                              |  |                | 3,699   |   |                    |  
|                                                                                                                                                                                  |  |                |         |   |                    |  
|Total current liabilities                                                                                                                                                         |  |                | 68,325  |   |                    |  
|                                                                                                                                                                                  |  |                |         |   |                    |  
|LONG-TERM LIABILITIES:                                                                                                                                                            |  |                |         |   |                    |  
|Deferred tax liability                                                                                                                                                            |  |                | 379     |   |                    |  
|Other                                                                                                                                                                             |  |                | 17,180  |   |                    |  
|                                                                                                                                                                                  |  |                |         |   |                    |  
|Total long-term liabilities                                                                                                                                                       |  |                | 17,559  |   |                    |  
|                                                                                                                                                                                  |  |                |         |   |                    |  
|CONTINGENCIES (Note 3)                                                                                                                                                            |  |                |         |   |                    |  
|                                                                                                                                                                                 
|STOCKHOLDERS EQUITY:                                                                                                                                                             |  |                |         |   |                    |  
|Capital stock:                                                                                                                                                                    |  |                |         |   |                    |  
|Preferred stock-authorized, 10,000,000 shares of $1 par value; none issued or
outstanding                                                                                         |  |                |         |   |                    |  
|Common stock-authorized 75,000,000 shares of $.50 par value; 15,433,016 and 15,369,638
shares issued and outstanding at March 31, 2003 and December 31, 2002, respectively        |  |                | 7,717   |   |                    |  
|Class B common stock-authorized, 32,000,000 shares of $.50 par value; 7,192,427 and
7,192,427 shares issued and outstanding at March 31, 2003 and December 31, 2002, respectively |  |                | 3,596   |   |                    |  
|Additional paid in capital                                                                                                                                                        |  |                | 44,543  |   |                    |  
|Retained earnings                                                                                                                                                                 |  |                | 140,944 |   |                    |  
|Accumulated other comprehensive loss                                                                                                                                              |  |                | (2,523  | ) |                    |  
|                                                                                                                                                                                  |  |                |         |   |                    |  
|Total stockholders equity                                                                                                                                                        |  |                | 194,277 |   |                    |  
|                                                                                                                                                                                  |  |                |         |   |                    |  
|TOTAL                                                                                                                                                                             |  | $              | 280,161 |   |                    | $
|                                                                                                                                                                                  |  |                |         |   |                    |  



See notes
to unaudited consolidated financial statements





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HYDRIL
COMPANY

Part I, Item 1: Unaudited Consolidated Statements of Operations

(In Thousands, Except Share and Per
Share Amounts)



|                                            |  | Three Months Ended March 31, |           
|------------------------------------------- |  | ---------------------------- | ----------
|                                            |  | 2003                         |           
|REVENUE                                     |  | $                            | 57,338    
|COST OF SALES                               |  |                              | 35,039    
|                                            |  |                              |           
|GROSS PROFIT                                |  |                              | 22,299    
|                                            |  |                              |           
|SELLING, GENERAL & ADMINISTRATION EXPENSES: |  |                              |           
|Engineering                                 |  |                              | 3,666     
|Sales and marketing                         |  |                              | 3,998     
|General and administration                  |  |                              | 4,307     
|                                            |  |                              |           
|Total                                       |  |                              | 11,971    
|                                            |  |                              |           
|OPERATING INCOME                            |  |                              | 10,328    
|INTEREST EXPENSE                            |  |                              | (555      
|INTEREST INCOME                             |  |                              | 250       
|OTHER EXPENSE, NET                          |  |                              | (80       
|                                            |  |                              |           
|INCOME BEFORE INCOME TAXES                  |  |                              | 9,943     
|PROVISION FOR INCOME TAXES                  |  |                              | 3,480     
|                                            |  |                              |           
|NET INCOME                                  |  | $                            | 6,463     
|                                            |  |                              |           
|NET INCOME PER SHARE:                       |  |                              |           
|BASIC                                       |  | $                            | 0.29      
|                                            |  |                              |           
|DILUTED                                     |  | $                            | 0.28      
|                                            |  |                              |           
|WEIGHTED AVERAGE SHARES OUTSTANDING:        |  |                              |           
|BASIC                                       |  |                              | 22,593,902
|DILUTED                                     |  |                              | 22,944,120



See notes
to unaudited consolidated financial statements





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HYDRIL
COMPANY

Part I, Item 1: Unaudited Consolidated Statements of Cash Flows

(In Thousands)



|                                                                              |  | Three Months Ended March 31, |       
|----------------------------------------------------------------------------- |  | ---------------------------- | ------
|                                                                              |  | 2003                         |       
|CASH FLOWS FROM OPERATING ACTIVITIES:                                         |  |                              |       
|Net income                                                                    |  | $                            | 6,463 
|Adjustments to reconcile net income to net cash used in operating
activities: |  |                              |       
|Depreciation                                                                  |  |                              | 2,889 
|Deferred income taxes                                                         |  |                              | 782   
|Provision for doubtful accounts                                               |  |                              | 104   
|Change in operating assets and liabilities:                                   |  |                              |       
|Receivables                                                                   |  |                              | 434   
|Contract costs and estimated earnings in excess of billings                   |  |                              | (3,185
|Inventories                                                                   |  |                              | 1,590 
|Other current and noncurrent assets                                           |  |                              | 368   
|Accounts payable                                                              |  |                              | (22   
|Billings in excess of contract costs and estimated earnings                   |  |                              | 222   
|Accrued liabilities                                                           |  |                              | (5,934
|Income taxes payable                                                          |  |                              | (64   
|Other long-term liabilities                                                   |  |                              | 810   
|                                                                              |  |                              |       
|Net cash provided by (used in) operating activities                           |  |                              | 4,457 
|                                                                              |  |                              |       
|NET CASH FROM INVESTING ACTIVITIES:                                           |  |                              |       
|Purchase of held-to-maturity investments                                      |  |                              | (9,591
|Proceeds from held-to-maturity investments                                    |  |                              | 5,657 
|Capital expenditures                                                          |  |                              | (1,803
|                                                                              |  |                              |       
|Net cash used in investing activities                                         |  |                              | (5,737
|                                                                              |  |                              |       
|NET CASH FROM FINANCING ACTIVITIES:                                           |  |                              |       
|Repayment of debt                                                             |  |                              |      
|Repayment of capital leases                                                   |  |                              |      
|Net proceeds from issuance of common stock                                    |  |                              | 102   
|Net proceeds from exercise of stock options                                   |  |                              | 255   
|                                                                              |  |                              |       
|Net cash provided by financing activities                                     |  |                              | 357   
|                                                                              |  |                              |       
|NET DECREASE IN CASH AND CASH EQUIVALENTS                                     |  |                              | (923  
|CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                              |  |                              | 61,590
|                                                                              |  |                              |       
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                                    |  | $                            | 60,667
|                                                                              |  |                              |       
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                             |  |                              |       
|Interest paid                                                                 |  | $                            | 523   
|Income taxes paid:                                                            |  |                              |       
|Domestic                                                                      |  |                              |      
|Foreign                                                                       |  |                              | 2,581 



See notes
to unaudited consolidated financial statements





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Hydril
Company



Part I, Item 1: Notes to Unaudited Consolidated Financial Statements



Note 1  BASIS OF PRESENTATION



Principles of ConsolidationThe consolidated financial statements include the accounts of Hydril Company and its wholly owned subsidiaries. Intercompany accounts and transactions are
eliminated in consolidation.



Use of
EstimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets
and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.



ReclassificationsCertain prior year
amounts within the consolidated financial statements have been reclassified to conform to the current years presentation.



Interim PresentationThe accompanying consolidated interim financial statements and disclosures have been prepared by the
Company in accordance with accounting principles generally accepted in the United States of America and in the opinion of management reflect all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation in all
material respects of the financial position and results for the interim periods. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Companys Annual Report on Form
10-K for the year ended December 31, 2002. The results of operations for the three months ended March 31, 2003 are not necessarily indicative of results to be expected for the full year.



Note 2  Product Warranty Liability



The changes in the aggregate product warranty liability is as follows for the quarters ended March 31:



|(in thousands)                         |  | 2003 |       |   | 2002 |  
|-------------------------------------- |  | ---- | ----- | - | ---- | -
|Beginning balance                      |  | $    | 3,274 |   |      | $
|Claims paid                            |  |      | (412  | ) |      |  
|Additional warranty charged to expense |  |      | 50    |   |      |  
|                                       |  |      |       |   |      |  
|Ending balance                         |  | $    | 2,912 |   |      | $
|                                       |  |      |       |   |      |  



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Note 3  LONG-TERM
CONTRACTS



The components of long-term
contracts as of March 31, 2003 and December 31, 2002 consist of the following:



|                                                                          |  | March 31, 2003 |         |   | December 31, 2002 |  
|------------------------------------------------------------------------- |  | -------------- | ------- | - | ----------------- | -
|                                                                          |  | (in thousands) |        
|Costs and estimated earnings on uncompleted contracts                     |  | $              | 57,052  |   |                   | $
|Less: billings to date                                                    |  |                | (54,241 | ) |                   |  
|                                                                          |  |                |         |   |                   |  
|Excess of costs and estimated earnings over billings                      |  | $              | 2,811   |   |                   | $
|                                                                          |  |                |         |   |                   |  
|Included in the accompanying balance sheets under the following
captions: |  |                |         |   |                   |  
|Contract costs and estimated earnings in excess of billings               |  | $              | 8,014   |   |                   | $
|Billings in excess of contract costs and estimated earnings               |  |                | (5,203  | ) |                   |  
|                                                                          |  |                |         |   |                   |  
|Total                                                                     |  | $              | 2,811   |   |                   | $
|                                                                          |  |                |         |   |                   |  



Note 4 
CONTINGENCIES



The Company is involved in
legal proceedings arising in the ordinary course of business. In the opinion of management these matters are such that their outcome will not have a material adverse effect on the financial position or results of operations of the Company.



The Company has been identified as a potentially
responsible party at a waste disposal site near Houston, Texas. Based on the number of other potentially responsible parties, the total estimated site cleanup costs and its estimated share of such costs, the Company does not expect this matter to
materially affect its results of operation or financial condition.



Note 5  LONG TERM DEBT



The Companys borrowings as of March 31, 2003 and December 31, 2002 were as follows:



|                     |  | March 31, 2003 |         |   | December 31, 2002 |  
|-------------------- |  | -------------- | ------- | - | ----------------- | -
|                     |  | (in thousands) |        
|Senior notes         |  | $              | 30,000  |   |                   | $
|Less current portion |  |                | (30,000 | ) |                   |  
|                     |  |                |         |   |                   |  
|Total long-term debt |  | $              |        |   |                   | $
|                     |  |                |         |   |                   |  



The
$30,000,000 senior unsecured notes bear interest at a rate of 6.85% per annum, which is payable quarterly. The senior notes mature June 30, 2003 and may not be prepaid prior to this date unless the Company pays the noteholders a make-whole



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premium based on prevailing market interest rates. The long-term note agreement for these notes has one
financial event of default covenant, a minimum tangible net worth test, which the Company was in compliance with at March 31, 2003. Additional financial tests under the long-term note agreement, if not passed, restrict the Companys ability to
incur additional indebtedness or make acquisitions, investments and restricted payments, such as pay dividends and repurchase capital stock. At March 31, 2003, the Company satisfied these financial incurrence tests.



At March 31, 2003, the Company had available $10,000,000 in
total committed unsecured revolving lines of credit. Of this, $5,000,000 relates to the Companys U.S. operations and $5,000,000 relates to the Companys foreign operations. Under the domestic line, the Company may, at its election, borrow
at either a prime or LIBOR based interest rate. Interest rates under the line fluctuate depending on the Companys leverage ratio and are LIBOR plus a spread ranging from 125 to 200 basis points or prime. At March 31, 2003, there were no
outstanding borrowings under this credit facility. There are covenants under this line which require the Company to maintain certain financial ratios. The Company was in compliance with these covenants at March 31, 2003.



Additionally, under the foreign line of credit the Company
may, at its election, borrow in U.S. dollars at either a prime or LIBOR based interest rate. Interest rates under the credit line fluctuate depending on the Companys leverage ratio and are prime plus a spread ranging from zero to 25 basis
points or LIBOR plus a spread ranging from 125 to 225 basis points. If a borrowing is made in a foreign currency, the rate would be the U.K. base rate plus a spread ranging from 138 basis points to 238 basis points. At March 31, 2003, there were no
outstanding borrowings under this facility. The foreign line does not contain any separate financial covenants but contains cross-default provisions which would be triggered by a default under the U.S. line of credit.



The Companys domestic and foreign lines of credit mature
on June 30, 2003.



The terms of the
Companys credit facilities allows for the issuance of letters of credit. The amount of outstanding letters of credit reduces the amount available for borrowing under the credit facilities. The letters of credit are generally short in duration
and immaterial in amount. At March 31, 2003 there was approximately $267,000 outstanding in letters of credit.



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Note 6  EARNINGS PER
SHARE



The Company has presented basic and
diluted income per share (EPS) on the consolidated statement of operations. Basic EPS excludes dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for
the period. Dilutive EPS is based on the weighted average number of shares outstanding during each period and the assumed exercise of dilutive stock options less the number of treasury shares from the proceeds using the average market price for the
Companys common stock for each of the periods presented. When potentially dilutive securities are anti-dilutive, they are not included in dilutive EPS. Basic weighted average shares outstanding for the three months ended March 31, 2003 and
2002 were 22,593,902 and 22,345,032, respectively. Dilutive weighted average shares outstanding for the three months ended March 31, 2003 and 2002 were 22,944,120 and 22,735,528, respectively.



Note 7  EMPLOYEE STOCK OPTION PLANS



The Company accounts for stock-based compensation using the
intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. Accordingly, no compensation expense has been recognized for the Companys stock option plans. In December
2002, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) 148 Accounting for Stock-Based CompensationTransition and Disclosure. The statement requires pro
forma disclosures that reflect the difference in stock-based employee compensation cost, if any, included in net income and the total cost measured by the fair value based method per SFAS 123 Accounting for Stock-Based Compensation, if
any, that would have been recognized in the income statement if the fair value based method had been applied to all awards.



The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition
provisions of SFAS 123 for the three months ended March 31, 2003 and 2002:



|(in thousands except per share data)                                                                                            |  | Three Months Ended March 31 |      
|------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | -----
|                                                                                                                                |  | 2003                        |      
|Net income, as reported                                                                                                         |  | $                           | 6,463
|Deduct: Total stock-based employee compensation expense determined under the fair value
based method for all awards, net of tax |  |                             | (448 
|                                                                                                                                |  |                             |      
|Proforma net income                                                                                                             |  | $                           | 6,015
|                                                                                                                                |  |                             |      
|Earnings per share:                                                                                                             |  |                             |      
|Basicas reported                                                                                                               |  | $                           | 0.29 
|Basicproforma                                                                                                                  |  | $                           | 0.27 
|Dilutedas reported                                                                                                             |  | $                           | 0.28 
|Dilutedproforma                                                                                                                |  | $                           | 0.26 



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Note 8  SEGMENT AND
RELATED INFORMATION



In accordance with
Statement of Financial Accounting Standards (SFAS) No. 131, Disclosures About Segments of an Enterprise and Related Information, the Company has identified the following reportable segments: Premium Connection and Pressure
Control.



The Companys premium connection
segment manufactures premium connections that are used in drilling environments where extreme pressure, temperature, corrosion and mechanical stress are encountered, as well as in environmentally sensitive drilling. These harsh drilling conditions
are typical for deepwater, deep-formation and horizontal wells. Hydril applies premium threaded connections to tubulars owned by its customers and purchases pipe in certain international markets for threading and resale. Hydril manufactures premium
threaded connections and provides services at facilities located in Houston, Texas; Westwego, Louisiana; Bakersfield, California; Nisku, Alberta, Canada; Aberdeen, Scotland; Veracruz, Mexico; Batam, Indonesia; and Port Harcourt and Warri, Nigeria.



The Companys pressure control segment
manufactures a broad range of pressure control equipment used in oil and gas drilling and well completion typically employed in harsh environments. The Companys pressure control products are primarily safety devices that control and contain
fluid and gas pressure during drilling, completion and maintenance in oil and gas wells. The Company also provides aftermarket replacement parts, repair and field services for its installed base of pressure control equipment. Hydril manufactures
pressure control products at two plant locations in Houston, Texas.



The accounting policies of the segments are the same as those described in Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES under Item 8 of our Annual Report on Form 10-K for the year-ended December 31, 2002
filed with the Securities and Exchange Commission. The Company evaluates performance based on operating income or loss.



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Financial data
for the business segments for the three months ended March 31, 2003 and 2002 is as follows:



|                         |  | Three Months Ended March 31, |       
|------------------------ |  | ---------------------------- | ------
|                         |  | (in thousands)               |       
|                         |  | 2003                         |       
|Revenue                  |  |                              |       
|Premium Connection       |  | $                            | 31,445
|Pressure Control         |  |                              | 25,893
|                         |  |                              |       
|Total                    |  | $                            | 57,338
|                         |  |                              |       
|Operating income (loss)  |  |                              |       
|Premium Connection       |  | $                            | 8,206 
|Pressure Control         |  |                              | 5,261 
|Corporate Administration |  |                              | (3,139
|                         |  |                              |       
|Total                    |  | $                            | 10,328
|                         |  |                              |       
|Depreciation expense     |  |                              |       
|Premium Connection       |  | $                            | 1,783 
|Pressure Control         |  |                              | 677   
|Corporate Administration |  |                              | 429   
|                         |  |                              |       
|Total                    |  | $                            | 2,889 
|                         |  |                              |       
|Capital expenditures     |  |                              |       
|Premium Connection       |  | $                            | 624   
|Pressure Control         |  |                              | 885   
|Corporate Administration |  |                              | 294   
|                         |  |                              |       
|Total                    |  | $                            | 1,803 
|                         |  |                              |       



Note 9  RECENT
ACCOUNTING PRONOUNCEMENTS



In August 2001,
the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations. SFAS 143 requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding
increase in the carrying amount of the related long-lived asset. Subsequently, the asset retirement costs should be allocated to expense using a systematic and rational method. SFAS 143 is effective for fiscal years beginning after June 15, 2002.
The Company adopted SFAS 143 effective January 1, 2003, which had no material impact on the results of operations or financial condition.



In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and
Technical Corrections. The rescission of SFAS No. 4, Reporting Gains and Losses from Extinguishment of Debt, and SFAS No. 64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements, will affect income
statement classification of gains and losses from extinguishment of debt. SFAS No. 4 required that gains and losses from extinguishment of debt be classified as an extraordinary item, if material. Under SFAS No. 145, extinguishment of debt is now
considered a risk management strategy by the reporting enterprise and the FASB does not believe it should be considered extraordinary under



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the criteria in APB Opinion No. 30, Reporting the Results of OperationsReporting the Effects
of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, unless the debt extinguishment meets the unusual in nature and infrequency of occurrence criteria in APB Opinion
No. 30. SFAS No. 145 will be effective for fiscal years beginning after May 15, 2002. The Companys early adoption of SFAS 145, effective July 1, 2002, had no material impact on the results of operations or financial condition.



In July 2002, the FASB issued SFAS No. 146, Accounting
for Costs Associated with Exit or Disposal Activities. This standard requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan.
Previous accounting guidance was provided by EITF Issue No. 94-3. Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). SFAS No. 146 replaces
Issue 94-3 and is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. The Company adopted SFAS 146 effective January 1, 2003, which had no material impact on the results of operations or financial condition.



In December 2002, the FASB issued SFAS No. 148,
Accounting for Stock-Based CompensationTransition and Disclosurean amendment of FASB Statement No. 123. This statement provides alternative methods of transition for an entity that voluntarily changes to the fair value based
method of accounting for stock-based employee compensation and amends APB Opinion No. 28, Interim Financial Reporting to require disclosure of those effects in interim financial information. Additionally, the statement requires new
disclosures about the effect of stock-based employee compensation on reported results and specifies the form, content, and location of those disclosures. This statement is effective for fiscal years ending after December 15, 2002. The Company has
adopted the disclosure only provisions of SFAS 148 and continues to account for stock-based compensation using the intrinsic value method prescribed in APB 25. See Note 7 for additional information.



In November 2002, the Financial Accounting Standards Board
issued Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others an Interpretation of FASB Statements No. 5, 57, and 107 and Rescission of FASB
Interpretation No. 34. The interpretation addresses disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under guarantees. The disclosure requirements in the interpretation are effective
for financial statements of interim or annual periods ending after December 15, 2002. The Company adopted FASB Interpretation No. 45 effective January 1, 2003, which had no material impact on the results of operations or financial condition.



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Part I, Item 2:    Managements Discussion and Analysis of Financial Condition and Results of Operations



The following discussion of Hydrils historical results of operations and financial condition should be read in conjunction with
Hydrils unaudited consolidated financial statements and notes thereto included elsewhere in this report and the audited consolidated financial statements and notes thereto included in Hydrils Annual Report on Form 10-K for the year ended
December 31, 2002.



OVERVIEW



Hydril Company is engaged worldwide in engineering,
manufacturing and marketing premium connection and pressure control products used for oil and gas drilling and production. Our premium connections are used in drilling environments where extreme pressure, temperature, corrosion and mechanical stress
are encountered, as well as in environmentally sensitive drilling. These harsh drilling conditions are typical for deep-formation, deepwater and horizontal wells. Our pressure control products are primarily safety devices that control and contain
fluid and gas pressure during drilling, completion and maintenance of oil and gas wells. We also provide aftermarket replacement parts, repair and field services for our installed base of pressure control equipment. These products and services are
required on a recurring basis because of the impact of the extreme conditions in which pressure control products are used.



Demand for our products and services is cyclical and substantially dependent on the activity levels in the oil and gas industry and our
customers willingness to spend capital on the exploration and development of oil and gas reserves. The level of these capital expenditures is highly sensitive to current and expected oil and gas prices, which have historically been
characterized by significant volatility. Our premium connection products are marketed primarily to exploration and production company operators. In North America, our premium connection business is driven principally by the number of rigs drilling
to target depths greater than 15,000 feet and by the number of rigs drilling in water depths greater than 1,500 feet. Internationally, the total rig count is a relevant indicator of the premium connections market. We sell our pressure control
products primarily to drilling contractors for use in oil and gas drilling and production. The main factors that affect sales of pressure control capital equipment products are the level of construction of new drilling rigs and the rate at which
existing rigs are refurbished. Demand for our pressure control aftermarket replacement parts, repair and field services primarily depends upon the level of worldwide offshore drilling activity as well as the total U.S. rig count. The following
tables illustrate the data for these sectors over the last five quarters:



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|Average U.S. Rig Count Over 15,000 ft Target Depth
(1) |  | Average Gulf of Mexico Rig Count Over 1,500 ft Water Depth (2) |  | Average International Rig Count (3)
|------------------------------------------------------ |  | -------------------------------------------------------------- |  | -----------------------------------
|                                                      
|Quarter Ended                                          |  | Number of Rigs                                                 |  |                                    
|03/31/02                                               |  | 128                                                            |  |                                    
|06/30/02                                               |  | 129                                                            |  |                                    
|09/30/02                                               |  | 134                                                            |  |                                    
|12/31/02                                               |  | 119                                                            |  |                                    
|03/31/03                                               |  | 126                                                            |  |                                    



|Average Worldwide Offshore Rig Count
(4) |  | Average U.S. Total Rig Count (5)
|---------------------------------------- |  | --------------------------------
|                                        
|Quarter Ended                            |  | Number of Rigs                  
|03/31/02                                 |  | 351                             
|06/30/02                                 |  | 339                             
|09/30/02                                 |  | 342                             
|12/31/02                                 |  | 344                             
|03/31/03                                 |  | 324                             



| | (1) |  | Source: Average rig count calculated by Hydril using weekly data published by Smith International.
| | --- |  | --------------------------------------------------------------------------------------------------



| | (2) |  | Source: Average rig count calculated by Hydril using month-end data provided by ODS-Petrodata Group.
| | --- |  | ----------------------------------------------------------------------------------------------------



| | (3) |  | Source: Average rig count calculated by Hydril using monthly data published by Baker Hughes Incorporated. The international rig count includes land and offshore data
for Europe, the Middle East, Africa, Latin America and Asia Pacific, and excludes data for Canada and the United States.
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (4) |  | Source: Average rig count calculated by Hydril using weekly data for the United States and Canada, and monthly data for the international regions, as published by
Baker Hughes International. The worldwide offshore rig count includes data for Europe, the Middle East, Africa, Latin America, Asia Pacific, the United States and Canada.
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (5) |  | Source: Average rig count calculated by Hydril using weekly data published by Baker Hughes Incorporated.
| | --- |  | --------------------------------------------------------------------------------------------------------



RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002



Revenue



Total revenue decreased $0.7 million, or 1%, to $57.3 million
for the three months ended March 31, 2003 compared to $58.0 million for the three months ended March 31, 2002. Our premium connection revenue increased $2.1 million, or 7%, to $31.4 million for the three months ended March 31, 2003 as compared to
$29.3 million for the prior



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year period. This increase is primarily the result of higher volumes in our domestic business driven by
orders from distributors to replenish inventory in response to customer demand and internationally as a result of the shipment of several orders for Venezuela that had been delayed from the fourth quarter of 2002. Pressure control revenue decreased
$2.8 million, or 10%, to $25.9 million for the three months ended March 31, 2003 compared to $28.7 million for the same period in 2002. Capital equipment revenue decreased 20% due to the completion of several capital equipment projects during the
quarter and several others that are nearing completion, which was partially offset by a 3% increase in aftermarket revenue.



Gross Profit



Gross profit increased $1.6 million to $22.3 million for the three months ended March 31, 2003 from $20.7 million for the three months
ended March 31, 2002. The increase was primarily due to a shift in product mix and some increased plant efficiencies in our premium connection segment, and higher gross profit on several capital equipment projects nearing completion in our pressure
control segment.



Selling, General and Administrative Expenses



Selling, general, and administrative
expenses for the first quarter of 2003 were $12.0 million compared to $11.2 million for the prior year period. The increase was due to higher engineering expenses related to research and development activities. As a percentage of sales, selling,
general, and administrative expenses were 21% for the first quarter of 2003 compared to 19% for the first quarter of 2002.



Operating Income



Operating income increased $0.8 million to $10.3 million for the three months ended March 31, 2003 compared to $9.5 million for the same
period in 2002. Operating income for our premium connection segment increased $1.0 million to $8.2 million for the first quarter of 2003 from $7.2 million for the first quarter of 2002. Operating income for our pressure control segment decreased
$0.2 million to $5.3 million for the quarter ended March 31, 2003 compared to the same period in 2002. Corporate and administrative expenses remained constant at $3.1 million for the three months ended March 31, 2003 compared to the prior year
period.



Interest Expense



Interest expense for the three months ended March 31, 2003
was $.6 million compared to $1.1 million for the prior year period. The reduction in interest expense was due to lower outstanding debt in the first quarter of 2003.



LIQUIDITY AND CAPITAL RESOURCES



Our primary liquidity needs are to repay indebtedness, fund capital expenditures, fund new product
development and to provide additional working capital. Our primary source of funds is cash flow from operations. In addition, we have available $10 million in revolving credit facilities.



Operating Activities



For the three months ended March 31, 2003, cash provided by operating activities was $4.5 million primarily due to earnings and
contractual cash payments received from



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customers on capital equipment long-term projects which was partially offset by higher working capital
requirements. Cash used in operations for the three months ended March 31, 2002 was $5.8 million which was the result of increased working capital requirements to support the manufacture of pressure control capital equipment projects and to support
increased product demand in our premium connection international markets.



Investing Activities



Net
cash used in investing activities was $5.7 million for the three months ended March 31, 2003 compared to $5.2 million for the three months ended March 31, 2002. The investment of cash in the first quarter of 2003 was attributable to the net purchase
of held-to-maturity securities and capital spending, while the investment of cash in the first quarter of 2002 was solely for capital spending. Capital spending for the three months ended March 31, 2003 of $1.8 million included $0.9 million for our
pressure control segment and $0.6 million for our premium connection segment, in both cases primarily to support manufacturing operations, and $.3 million for general corporate purposes. Capital spending for the same period in 2002 of $5.2 million
included $2.8 million in our premium connection segment related to plant capacity expansion and $2.4 million in our pressure control segment to replace and refurbish machine tools as well as to construct a new deepwater assembly building for blowout
preventer stack assembly at our Houston plant.



Credit
Facilities



We have two unsecured revolving
lines of credit for working capital requirements that provide up to $10.0 million in total committed revolving credit borrowings through June 30, 2003. Of these, $5.0 million relates to our U.S. operations and $5.0 million relates to our foreign
operations. Under these lines, we may borrow, at our election, at either a prime or LIBOR based interest rate. Interest rates under the U.S. facility fluctuate depending on our leverage ratio and are LIBOR plus a spread ranging from 125 to 200 basis
points or prime. Interest rates under the foreign credit line fluctuate depending on the Companys leverage ratio and whether the borrowings are in U.S. dollars or foreign currency. For borrowings in U.S. dollars, the rates are prime plus a
spread ranging from zero to 25 basis points or LIBOR plus a spread ranging from 125 to 225 basis points. For borrowings in foreign currency, the rates would be the U.K. base rate plus a spread ranging from 138 basis points to 238 basis points. At
March 31, 2003, there were no outstanding borrowings under either facility. Our U.S. revolving credit agreement contains covenants with respect to debt levels, tangible net worth, debt-to-capitalization and interest coverage ratios. At March 31,
2003, we were in compliance with these covenants. Our foreign line of credit does not contain any separate financial covenants but contains cross-default provisions which would be triggered by a default under our U.S. line of credit.



The terms of the Companys credit facilities allows for
the issuance of letters of credit. The amount of outstanding letters of credit reduces the amount available for borrowing under the credit facilities. The letters of credit are generally short in duration and immaterial in amount. At March 31, 2003
there was approximately $0.3 million outstanding in letters of credit.



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Both revolving
lines of credit mature on June 30, 2003. We currently anticipate that, prior to that maturity, we will enter into one or more lines of credit. The terms of any lines would be based on various factors including anticipated liquidity needs and terms
and conditions available from lenders. These arrangements may be in the form of new lines of credit or an extension and modification of existing agreements. The terms of any future borrowing arrangements may vary from those of the existing lines of
credit.



Other Indebtedness



We have $30 million aggregate principal amount of 6.85%
senior notes which mature on June 30, 2003. We anticipate having cash available at June 30, 2003 to pay the balance of this obligation at maturity; however, depending on the facts and circumstances at the time, we may choose to refinance all or a
portion of the notes.



Backlog



The pressure control capital equipment backlog was $23.3
million at March 31, 2003, $32.5 million at December 31, 2002 and $54.3 million at March 31, 2002. The decrease from March 31, 2002 was the result of work completed and revenue recognized on several large long-term capital equipment project orders.
The remaining revenue from projects currently in backlog is expected to be recorded during the remainder of 2003. We recognize the revenue and gross profit from pressure control long-term projects using the percentage-of-completion accounting
method. As revenue is recognized under the percentage-of-completion method, the order value in backlog is reduced. It is possible for orders to be cancelled; however, in the event of cancellations all costs incurred would be billable to the
customer. Our backlog of premium connection and pressure control aftermarket parts and service are not a meaningful measure of business prospects due to the quick turnover of such orders.



CRITICAL ACCOUNTING POLICIES



Our accounting policies are described in Note 1 SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES under Item 8 of our Annual Report on Form 10-K for the year-ended December 31, 2002 filed with the Securities and Exchange Commission. We prepare our consolidated financial statements in conformity with
accounting principles generally accepted in the United States, which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expense during the year. Actual results could differ from those estimates. We consider the following policies to be most critical in understanding the judgments that are involved in
preparing our financial statements and the uncertainties that could impact our results of operations, financial condition and cash flows.



Revenue Recognition



Revenue for all products and services is recognized at the time such products are delivered or services are performed, except as described
below.



Revenue from long-term contracts, which
are generally contracts from six to eighteen months and an estimated contract price in excess of $1.0 million is recognized using the percentage-of-completion method measured by the percentage of cost incurred to estimated final cost. Contract costs
include all direct material, labor and



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subcontract costs and those indirect costs related to contract performance. If a long-term contract was
anticipated to have an estimated loss, such loss would be recognized in the period in which the loss becomes apparent. It is possible but not contemplated that estimates of contract costs could be revised significantly higher in the near term as a
result of unforeseen engineering and manufacturing changes.



Inventories



Inventories
are stated at the lower of cost or market. Inventory costs include material, labor and production overhead. Cost is determined by the last in, first out method for substantially all pressure control products (approximately 85% and 81% of total gross
inventories at December 31, 2002 and 2001, respectively) and by the first-in, first-out method for all other inventories.



The Company periodically reviews its inventory for excess or obsolete items and provides a reserve for the difference in the carrying
value of excess or obsolete items and their estimated net realizable value.



Product warranties



The
Company sells certain of its products to customers with a product warranty that provides that customers can return a defective product during a specified warranty period following the purchase in exchange for a replacement product or for repair at
no cost to the customer or the issuance of a credit to the customer. The Company accrues its estimated exposure for product warranties based on known warranty claims as well as current and historical warranty costs incurred.



Contingencies



Contingencies are accounted for in accordance with the
FASBs SFAS No. 5, Accounting for Contingencies. SFAS No. 5 requires that we record an estimated loss from a loss contingency when information available prior to the issuance of our financial statements indicates that it is probable
that an asset has been impaired or a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Accounting for contingencies such as environmental, legal, and income tax matters
requires us to use our judgment. While we believe that our accruals for these matters are adequate, if the actual loss from a contingency is significantly different than the estimated loss, our results of operations may be adjusted in the period in
which the actual loss is realized.



RISK
FACTORS



You should consider carefully the
following risk factors and all other information contained in this quarterly report on Form 10-Q and our Annual Report on Form 10-K for the year-ended December 31, 2002. Any of the following risks could impair our business, financial condition and
operating results.



Risks Relating to Our Business



A material or extended decline in
expenditures by the oil and gas industry, due to a decline in oil and gas prices or other economic factors, would reduce our revenue.



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Demand for our
products and services is substantially dependent on the level of capital expenditures by the oil and gas industry for the exploration for and development of crude oil and natural gas reserves. In particular, demand for our premium connections and
our aftermarket pressure control products and services is driven by the level of worldwide drilling activity, especially drilling in harsh environments. Demand for our pressure control capital equipment is directly affected by the number of drilling
rigs being built or refurbished. At this time, drilling rig utilization for many categories of rigs is below capacity. Therefore in general, drilling contractors are not planning significant refurbishment of drilling rigs or new rig construction. A
substantial or extended decline in worldwide drilling activity or in construction or refurbishment of rigs will adversely affect the demand for our products or services.



Worldwide drilling activity is generally highly sensitive to oil and gas prices and can be dependent on the
industrys view of future oil and gas prices, which have been historically characterized by significant volatility. Oil and gas prices are affected by numerous factors, including:



| |  |  | the level of worldwide oil and gas exploration and production activity;
| | - |  | -----------------------------------------------------------------------



| |  |  | worldwide demand for energy, which is affected by worldwide economic conditions;
| | - |  | --------------------------------------------------------------------------------



| |  |  | the policies of the Organization of Petroleum Exporting Countries, or OPEC;
| | - |  | ---------------------------------------------------------------------------



| |  |  | significant decreases or increases in the production of oil or gas from countries due to war or civil unrest, such as Iraq, Venezuela and Nigeria;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the cost of producing oil and gas;
| | - |  | ----------------------------------



| |  |  | interest rates and the cost of capital;
| | - |  | ---------------------------------------



| |  |  | technological advances affecting energy consumption;
| | - |  | ----------------------------------------------------



| |  |  | environmental regulation;
| | - |  | -------------------------



| |  |  | level of oil and gas inventories in storage;
| | - |  | --------------------------------------------



| |  |  | tax policies;
| | - |  | -------------



| |  |  | policies of national governments; and
| | - |  | -------------------------------------



| |  |  | war, civil disturbances and political instability.
| | - |  | --------------------------------------------------



We expect prices for oil and natural gas to continue to be volatile and affect the demand and pricing of our products and services. A
material decline in oil or gas prices could materially adversely affect our business. In addition, recessions and other adverse economic conditions can also cause declines in spending levels by the oil and gas industry, and thereby decrease our
revenue and materially adversely affect our business.



The occurrence or threat of terrorist attacks could have an adverse affect on our results and growth prospects, as well as on our ability to access capital and obtain adequate insurance.



The occurrence or threat of future terrorist attacks such as
those against the United States on September 11, 2001 could adversely affect the economies of the United States and other developed countries. A lower level of economic activity could result in a decline in energy consumption, which could cause a
decrease in spending by oil and



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gas companies for exploration and development. In addition, these risks could trigger increased volatility
in prices for crude oil and natural gas which could also adversely affect spending by oil and gas companies. A decrease in spending for any reason could adversely affect the markets for our products and thereby adversely affect our revenue and
margins and limit our future growth prospects. Moreover, these risks could cause increased instability in the financial and insurance markets and adversely affect our ability to access capital and to obtain insurance coverage that we consider
adequate or are otherwise required by our contracts with third parties.



We rely on a few distributors for sales of our premium connections in the United States and Canada; a loss of one or more of our distributors or a change in the method of distribution could adversely affect our ability to
sell our products.



There are a limited
number of distributors who buy steel tubulars, contract with us to thread the tubulars and sell completed tubulars with our premium connections. In 2002, our nine distributors accounted for 63% of our premium connection sales in the United States
and Canada.



In the United States, tubular
distributors have combined on a rapid basis in recent years resulting in fewer distribution alternatives for our products. In 1999, four distributors, one of which distributed our premium connections, combined to become one of the largest
distributors of tubulars in the United States, and the combined company no longer distributes our products. Because of the limited number of distributors, we have few alternatives if we lose a distributor. Identifying and utilizing additional or
replacement distributors may not be accomplished quickly and could involve significant additional costs. Even if we find replacement distributors, the terms of new distribution agreements may not be favorable to us. In addition, distributors may not
be as well capitalized as our end-users and may present a higher credit risk.



We cannot assure you that the current distribution system for premium connections will continue. For example, products may in the future be sold directly by tubular manufacturers to end-users or
through other distribution channels such as the internet. If methods of distribution change, many of our competitors may be better positioned to take advantage of those changes than we are.



The consolidation or loss of end-users of our products
could adversely affect demand for our products and services and reduce our revenue.



Exploration and production company operators and drilling contractors have undergone substantial consolidation in the last few years. Additional consolidation is probable.



Consolidation results in fewer end-users for our products. In
addition, merger activity among both major and independent oil and gas companies also affects exploration, development and production activity, as these consolidated companies attempt to increase efficiency and reduce costs. Generally, only the more
promising exploration and development projects from each merged entity are likely to be pursued, which may result in overall lower post-merger exploration and development budgets.



In 2002, our largest premium connection customer accounted for 19% of segment sales, and our ten largest
premium connection customers accounted for 64% of total segment sales. In 2002, our two largest pressure control customers accounted for



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26% and 18% of segment sales and our ten largest pressure control customers accounted for 70% of segment
sales.



The loss of one or more of our end-users
or a reduction in exploration and development budgets as a result of industry consolidation or other reasons could adversely affect demand for our products and services and reduce our revenue.



The intense competition in our industry could result in
reduced profitability and loss of market share for us.



Contracts for our products and services are generally awarded on a competitive basis, and competition is intense. The most important factors considered by our customers in awarding contracts include:



| |  |  | availability and capabilities of the equipment;
| | - |  | -----------------------------------------------



| |  |  | ability to meet the customers delivery schedule;
| | - |  | -------------------------------------------------



| |  |  | price;
| | - |  | ------



| |  |  | reputation;
| | - |  | -----------



| |  |  | experience;
| | - |  | -----------



| |  |  | safety record, and
| | - |  | ------------------



| |  |  | technology.
| | - |  | -----------



Many of our major competitors are diversified multinational companies that are larger and have substantially greater financial resources,
larger operating staffs and greater budgets for marketing and research and development than we do. They may be better able to compete in making equipment available faster and more efficiently, meeting delivery schedules or reducing prices. In
addition, two or more of our major competitors could consolidate producing an even larger company. Also our competitors may acquire product lines that would allow them to offer a more complete package of drilling equipment and services rather than
providing only individual components. As a result of any of the foregoing reasons, we could lose customers and market share to those competitors. These companies may also be better able than we are to successfully endure downturns in the oil and gas
industry.



We may lose premium connection
business to international and domestic competitors who produce their own pipe, as well as other new entrants.



In the United States and Canada and sometimes internationally, our premium connections are added to steel tubulars purchased by a
distributor from third-party steel suppliers. After our premium connections are added, the distributor sells the completed premium tubular to a customer at a price that includes, but does not differentiate between, the costs of the steel pipe and
the connection. Pricing of premium connections can be affected by steel prices, as the steel pipe is the largest component of the overall price. We have no control over the price of the steel pipe that is supplied for our connections.



During 2002, we derived approximately 61% of our premium
connection segment revenue from services or equipment ultimately provided or delivered to end-users for use outside of the United States. Many of our larger competitors, especially



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internationally, are integrated steel producers, who produce, rather than purchase, steel. For example,
several foreign steel mills have formed a corporation that is licensed to produce and sell a competing premium connections product line outside of the United States and Canada. Foreign integrated steel producers have more pricing flexibility for
premium connections since they control the production of both the steel tubulars to which the connections are applied, as well as the premium connections. This inherent pricing and supply control puts us at a competitive disadvantage, and we could
lose business to integrated steel producers even if we may have a better product. The recent acquisition or future acquisitions of U.S. tubular steel manufacturing capacity by foreign integrated steel producers could result in a loss of market share
for Hydril. Other domestic and foreign steel producers who do not currently manufacture tubulars with premium connections may in the future enter the premium connections business and compete with us.



The level and pricing of tubular goods imported into the
United States and Canada could adversely affect demand for our products and our results of operations.



The level of imports of tubular goods, which has varied significantly over time, affects the domestic tubular goods market. High levels of
imports reduce the volume sold by domestic producers and tend to reduce their selling prices, both of which could have an adverse impact on our business. We believe that United States import levels are affected by, among other things:



| |  |  | United States and overall world demand for tubular goods;
| | - |  | ---------------------------------------------------------



| |  |  | the trade practices of and government subsidies to foreign producers; and
| | - |  | -------------------------------------------------------------------------



| |  |  | the presence or absence of antidumping and countervailing duty orders.
| | - |  | ----------------------------------------------------------------------



In many cases, foreign producers of tubular goods have been found to have sold their products, which may
include premium connections, for export to the United States at prices that are lower than the cost of production or their prices in their home market or a major third-country market, a practice commonly referred to as dumping. If not
constrained by antidumping duty orders and countervailing duty orders, which impose duties on imported tubulars to offset dumping and subsidies provided by foreign governments, this practice allows foreign producers to capture sales and market share
from domestic producers. Duty orders normally reduce the level of imported goods and result in higher prices in the United States market. Duty orders may be modified or revoked as a result of administrative reviews conducted at the request of a
foreign producer or other party.



In addition,
antidumping and countervailing duty orders may be revoked as a result of periodic sunset reviews. Under the sunset review procedure, an order must be revoked after five years unless the United States Department of Commerce and the
International Trade Commission determine that dumping is likely to continue or recur and that material injury to the domestic injury is likely to continue or recur. Antidumping duty orders continue to cover imports of tubulars from Argentina, Italy,
Japan, Korea and Mexico, and a countervailing duty order continues to cover imports from Italy. On July 17, 2001, the Department of Commerce ordered the continuation of the countervailing and antidumping duty orders on tubular goods other than drill
pipe



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on Argentina, Italy, Korea and Mexico, and the continuation of the antidumping duty order on tubular
goods, inclusive of drill pipe, from Japan. If the orders covering imports from these countries are revoked in full or in part or the duty rates lowered, we could be exposed to increased competition from imports that could reduce our sales and
market share or force us to lower prices. Tubulars produced by domestic steel mills and threaded by us may not be able to economically compete with tubulars manufactured and threaded at steel mills outside the U.S. The Department of Commerce intends
to initiate the next five-year review of these orders no later that June 2006. The sunset review for tubular products from Argentina, Italy, Japan, Korea and Mexico will take place in 2006, with a decision expected by April 2007.



Overcapacity in the pressure control industry and high
fixed costs could exacerbate the level of price competition for our products, adversely affecting our business and revenue.



There currently is and historically has been overcapacity in the pressure control equipment industry. When oil and gas prices fall, cash
flows of our customers are reduced, leading to lower levels of expenditures and reduced demand for pressure control equipment. In addition, adverse economic conditions can reduce demand for oil and gas, which in turn could decrease demand for our
pressure control products. Under these conditions, the overcapacity causes increased price competition in the sale of pressure control products and aftermarket services as competitors seek to capture the reduced business to cover their high fixed
costs and avoid the idling of manufacturing facilities. Because we have multiple facilities that produce different types of pressure control products, it is even more difficult for us to reduce our fixed costs since to do so we might have to shut
down more than one plant. During and after periods of increasing oil and gas prices when sales of pressure control products may be increasing, the overcapacity in the industry will tend to keep prices for the sale of pressure control products lower
than if overcapacity were not a factor. As a result, when oil and gas prices are low, or are increasing from low levels because of increased demand, our business and revenue may be adversely affected because of either reduced sales volume or sales
at lower prices or both.



If we do not
develop, produce and commercialize new competitive technologies and products, our revenue may decline.



The markets for premium connections and pressure control products and services are characterized by continual technological developments.
As a result, substantial improvements in the scope and quality of product function and performance can occur over a short period of time. If we are not able to develop commercially competitive products in a timely manner in response to changes in
technology, our business and revenue may be adversely affected. Our future ability to develop new products depends on our ability to:



| |  |  | design and commercially produce products that meet the needs of our customers;
| | - |  | ------------------------------------------------------------------------------



| |  |  | successfully market new products; and
| | - |  | -------------------------------------



| |  |  | obtain and maintain patent protection.
| | - |  | --------------------------------------



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We may
encounter resource constraints or technical or other difficulties that could delay introduction of new products and services in the future. Our competitors may introduce new products before we do and achieve a competitive advantage.



Additionally, the time and expense invested in product
development may not result in commercial applications and provide revenue. We have invested significant amounts in the development of new technologies, such as advanced composite tubing and subsea mudlift drilling. We could be required to write off
our entire investment in a new product that does not reach commercial viability. Moreover, we may experience operating losses after new products are introduced and commercialized because of high start-up costs, unexpected manufacturing costs or
problems, or lack of demand.



If we are not
successful in developing and commercializing subsea mudlift drilling technology or other new technologies, our growth prospects may be reduced or we may be required to write-off any capitalized investment.



We have been working with a number of exploration and
production company operators and drilling contractors to develop a subsea mudlift drilling technology that, if successful, would enable exploration and production company operators to economically drill for and produce oil and gas in ultra-deepwater
in excess of 5,000 feet. In October 2001, the subsea drilling project successfully completed its final phase by drilling a test well in the Gulf of Mexico. The joint industry project team has completed its work and Hydril is now in the process of
refining the design of the equipment and pursuing commercialization of this technology. However, there are other groups of companies in our industry that are also developing competing technologies for deepwater drilling, and they may be ahead of us
in completing development of their technology. If one or more of these groups develops a commercially viable technology before we do, they may gain a significant competitive advantage over us.



In addition, the cost to implement the technology may be high
and there may be little demand for the completed technology. We are devoting significant resources to the development of subsea mudlift drilling technology.



If we are unable to successfully develop and commercialize subsea mudlift drilling, commercialize our advanced composite tubing, or
successfully implement other technological or R&D type activities, our growth prospects may be reduced and the level of our future revenue may be materially and adversely affected. In addition, if we are unsuccessful, we could be required to
write-off any capitalized investment in a product that does not reach commercial viability.



Limitations on our ability to protect our intellectual property rights could cause a loss in revenue and any competitive advantage we hold.



Some of our products and the processes we use to produce them
have been granted United States and international patent protection, or have patent applications pending. Nevertheless, patents may not be granted from our applications and, if patents are issued, the claims allowed may not be sufficient to protect
our technology. If our patents are not enforceable, our business may be adversely affected. In addition, if any of our products infringe patents held by others, our financial results may be adversely affected. Our competitors may be able to
independently develop technology that is similar to ours without infringing on our patents. The latter is especially true



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internationally where the protection of intellectual property rights may not be as effective. In addition,
obtaining and maintaining intellectual property protection internationally may be significantly more expensive than doing so domestically. We may have to spend substantial time and money defending our patents. After our patents expire, our
competitors will not be legally constrained from developing products substantially similar to ours.



The loss of any member of our senior management and other key employees may adversely affect our results of operations.



Our success depends heavily on the continued
services of our senior management and other key employees. Our senior management consists of a small number of individuals relative to other comparable or larger companies. These individuals are Christopher T. Seaver, our President and Chief
Executive Officer, Neil G. Russell, our Vice President of our Premium Connection segment, Charles E. Jones, our Vice President of our Pressure Control segment, and Michael C. Kearney, Chief Financial Officer and Vice President-Administration. These
individuals, as well as other key employees, possess sales and marketing, engineering, manufacturing, financial and administrative skills that are critical to the operation of our business.We generally do not have employment or
non-competition agreements with members of our senior management or other key employees. If we lose or suffer an extended interruption in the services of one or more of our senior officers or other key employees, our results of operations may
be adversely affected. Moreover, we may not be able to attract and retain qualified personnel to succeed members of our senior management and other key employees.



If we are unable to attract and retain skilled labor, the results of our manufacturing and services
activities will be adversely affected.



Our
ability to operate profitably and expand our operations depends in part on our ability to attract and retain skilled manufacturing workers, equipment operators, engineers and other technical personnel. Because of the cyclical nature of our industry,
many qualified workers choose to work in other industries where they believe lay-offs as a result of cyclical downturns are less likely. As a result, our growth may be limited by the scarcity of skilled labor. Even if we are able to attract and
retain employees, the intense competition for them, especially when our industry is in the top of its cycle, may increase our compensation costs. Additionally, a significant increase in the wages paid by competing employers could result in a
reduction in our skilled labor force, increases in the rates of wages we must pay or both. If our compensation costs increase or we cannot attract and retain skilled labor, the immediate effect on us would be a reduction in our profits and the
extended effect would be diminishment of our production capacity and profitability and impairment of any growth potential.



Our international operations may experience severe interruptions due to political, economic and other risks.



In 2002, approximately 69% of our total revenue was derived
from services or equipment ultimately provided or delivered to end-users outside the United States, and approximately 30% of our revenue was derived from products which were produced and used outside of the United States. We are, therefore,
significantly exposed to the



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risks customarily attendant to international operations and investments in foreign countries. These risks
include:



| |  |  | political instability, civil disturbances, war and terrorism;
| | - |  | -------------------------------------------------------------



| |  |  | nationalization, expropriation, and nullification of contracts;
| | - |  | ---------------------------------------------------------------



| |  |  | changes in regulations and labor practices;
| | - |  | -------------------------------------------



| |  |  | changes in currency exchange rates and potential devaluations;
| | - |  | --------------------------------------------------------------



| |  |  | changes in currency restrictions which could limit the repatriations of profits or capital;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | restrictive actions by local governments
| | - |  | ----------------------------------------



| |  |  | seizure of plant and equipment; and
| | - |  | -----------------------------------



| |  |  | changes in foreign tax laws.
| | - |  | ----------------------------



We have manufacturing facilities in Warri and Port Harcourt, Nigeria and in Batam, Indonesia. In addition, a portion of our revenue is
from sales to customers in Venezuela. These countries in recent history have experienced civil disturbances and violence. An interruption of our international operations could reduce our earnings or adversely affect the value of our foreign assets.
The occurrence of any of these risks could also have an adverse effect on demand for our products and services or our ability to provide them.



SARS could indirectly impact our international business and adversely affect our results of operations.



Severe Acute Respiratory Syndrome (SARS) is a highly
communicable disease that has been identified in Southeast Asia and other parts of the world from which we derive revenue. The spread of SARS could adversely affect demand for our products and services as a result of disruption to the operations of
the end-users of our products and services. As a result of SARS or other public health threats, travel restrictions, quarantines, the inability to access facilities or other operational disruptions in any part of the world in which our customers
operate may adversely impact our business in those regions and our results of operations. Our operations could also be directly disrupted by these types of public health measures. Moreover, SARS or other public health threats could adversely impact
the global economy, the worldwide demand for oil and natural gas and, accordingly, the level of demand for our products and services, which would adversely affect our results of operations.



We may lose money on fixed price contracts, and such
contracts could cause our quarterly revenue and earnings to fluctuate significantly.



Almost all of our pressure control projects, including all of our larger engineered subsea control systems projects, are performed on a fixed-price basis. This means that we are responsible for all
cost overruns, other than any resulting from change orders. Our costs and any gross profit realized on our fixed-price contracts will often vary from the estimated amounts on which these contracts were originally based. This may occur for various
reasons, including:



| |  |  | errors in cost, design or production time estimates;
| | - |  | ----------------------------------------------------



| |  |  | engineering design changes;
| | - |  | ---------------------------



| |  |  | changes requested by customers; and
| | - |  | -----------------------------------



| |  |  | changes in the availability and cost of labor and material.
| | - |  | -----------------------------------------------------------



The variations and the risks inherent in engineered subsea control systems projects may result in reduced profitability or losses on our
projects. Depending on the size of a project, variations from estimated contract performance can have a significant impact on our operating results for any particular fiscal quarter or year. Our significant losses in 1997 through 1999 on fixed-price
contracts to provide pressure control equipment and subsea control systems for pressure control equipment are an example of the problems we can experience with fixed-price contracts.



Our quarterly sales and earnings may vary significantly, which could cause our stock price to fluctuate.



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Fluctuations
in quarterly revenue and earnings could adversely affect the trading price of our common stock. Our quarterly revenue and earnings may vary significantly from quarter to quarter depending upon:



| |  |  | the level of drilling activity worldwide;
| | - |  | -----------------------------------------



| |  |  | the variability of customer orders, which are particularly unpredictable in international markets;
| | - |  | --------------------------------------------------------------------------------------------------



| |  |  | the mix of our products sold and the margins on those products;
| | - |  | ---------------------------------------------------------------



| |  |  | new products offered and sold by us or our competitors; and
| | - |  | -----------------------------------------------------------



| |  |  | weather conditions that can affect our customers operations.
| | - |  | -------------------------------------------------------------



Revenue derived from current or future pressure control long-term projects is expected to be realized over
periods of two to six quarters. As a result, our revenue and earnings could fluctuate significantly from quarter to quarter if there is any delay in completing these projects or if revenue is recognized sooner than expected. In addition, our fixed
costs cause our margins to decrease when demand is low and manufacturing capacity is underutilized.



We could be subject to substantial liability claims, which would adversely affect our results and financial condition.



Most of our products are used in hazardous
drilling and production applications where an accident or a failure of a product can cause personal injury, loss of life, damage to property, equipment or the environment, or suspension of operations. Damages arising from an occurrence at a location
where our products are used have in the past and may in the future result in the assertion of potentially large claims against us.



While we maintain insurance coverage against these risks, this insurance may not protect us against liability for some kinds of events,
including specified events involving pollution, or against losses resulting from business interruption. Our insurance may not be adequate in risk coverage or policy limits to cover all losses or liabilities that we may incur. Moreover, we may not be
able in the future to maintain insurance at levels of risk coverage or policy limits that we deem adequate. Any significant claims made under our policies will likely cause our premiums to increase. Any future damages caused by our products or
services that are not covered by insurance, are in excess of policy limits or are subject to substantial deductibles, could reduce our earnings and our cash available for operations.



Changes in regulation or environmental compliance costs and liabilities could have a material adverse
effect on our results and financial condition.



Our business is affected by changes in public policy, federal, state and local laws and regulations relating to the energy industry. The adoption of laws and regulations curtailing exploration and development drilling for oil and gas
for economic, environmental and other policy reasons may adversely affect our operations by limiting available drilling and other opportunities in the oil and gas exploration and production industry. Our operations and properties are subject to
increasingly stringent laws and regulations relating to environmental protection, including laws and regulations governing air emissions, water discharges, waste management and workplace safety.



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Many of our operations require permits that may be revoked or modified, that we are required to renew from
time to time. Failure to comply with such laws, regulations or permits can result in substantial fines and criminal sanctions, or require us to purchase costly pollution control equipment or implement operational changes or improvements. We incur,
and expect to continue to incur, substantial capital and operating costs to comply with environmental laws and regulations.



We could become subject to claims related to the release of hazardous substances which could adversely affect our results and financial
condition.



We use and generate hazardous
substances and wastes in our manufacturing operations. In addition, many of our current and former properties are or have been used for industrial purposes for many years. Accordingly, we could become subject to potentially material liabilities
relating to the investigation and cleanup of contaminated properties, including property owned or leased by us now or in the past or third party sites to which we sent waste for disposal. We also could become subject to claims alleging personal
injury or property damage as the result of exposures to, or releases of, hazardous substances. In addition, stricter enforcement of existing laws and regulations, the enactment of new laws and regulations, the discovery of previously unknown
contamination or the imposition of new or increased requirements could require us to incur costs or become the basis of new or increased liabilities that could reduce our earnings and our cash available for operations. See Note 11 to our audited
consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2002 for more information regarding environmental contingencies.



Liability to customers under warranties may materially and adversely affect our earnings.



We provide warranties as to the proper
operation and conformance to specifications of the equipment we manufacture. Our equipment and premium connections are complex and often deployed several miles below the earths surface in critical environments as well as subsea. Failure of
this equipment or our premium connections to operate properly or to meet specifications may increase our costs by requiring additional engineering resources and services, replacement of parts and equipment or monetary reimbursement to a customer. We
have in the past received warranty claims and we expect to continue to receive them in the future. To the extent that we incur substantial warranty claims in any period, our reputation, our ability to obtain future business and our earnings could be
materially and adversely affected.



Our debt
instruments contain covenants that limit our operating and financial flexibility.



The long-term note agreement for the senior notes has one financial event of default covenant, which is a minimum tangible net worth test. Additional financial tests under the long-term note agreement,
if not passed, restrict the Companys ability to incur additional indebtedness or make acquisitions, investments and restricted payments, such as pay dividends and repurchase capital stock. Under the terms of our revolving credit facility, we
must maintain minimum levels of tangible net worth, not exceed levels of debt specified in the agreement, comply with a fixed coverage test and not exceed a maximum leverage ratio.



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A breach under
the note agreement or our revolving credit facility could permit the lenders to accelerate the debt so that it is immediately due and payable. In that event, no further borrowings would be available under the revolving credit facility. Our ability
to meet the financial ratios and tests under our revolving credit facility and our note agreement can be affected by events beyond our control, and we may not be able to satisfy those ratios and tests.



Excess cash is invested in marketable securities which may
subject us to potential losses.



We invest
excess cash in various securities and money market mutual funds rated as the highest quality by a nationally recognized rating agency. However, changes in the financial markets, including interest rates, as well as the performance of the issuing
companies can affect the market value of our short-term investments.



Part I, Item 3:    Quantitative and Qualitative Disclosures About Market Risk



There have been no significant changes since December 31, 2002 in the Companys exposure to market risk.



Part I, Item 4:    Controls and Procedures



Within the 90-day period prior to the filing date of this report, Hydrils Chief Executive Officer and Chief Financial Officer have evaluated the Companys disclosure controls and procedures,
and they concluded that these controls and procedures are effective. Subsequent to the date of that evaluation, there have been no significant changes in internal controls or in other factors that could significantly affect the internal controls.



Part II, Item 6:    Exhibits and Reports on Form 8-K



Exhibits:



|99.1 |  |   Certification by Christopher T. Seaver, Chief Executive Officer, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (Subsection (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code).
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|99.2 |  |   Certification by Michael C. Kearney, Chief Financial Officer, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (Subsection (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)    



Reports on Form 8-K:



During the quarter ended March 31, 2003, no
reports were filed on Form 8-K.





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SIGNATURE



Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                   |  |  |  | HYDRIL COMPANY
|------------------ |  |  |  | --------------
|                  
|Date: May 14, 2002 |  |  |  | By:           
|                   |  |  |  |               



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CERTIFICATIONS



I, Christopher T. Seaver, certify that:



1. I have reviewed this quarterly report on Form 10-Q of Hydril Company;



2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly
report;



3. Based on my knowledge, the financial statements, and
other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;



4. The registrants other certifying officers and I are
responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:



(a) designed such disclosure controls and procedures to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;



(b) evaluated the effectiveness of the registrants disclosure controls and procedures as of a date
within 90 days prior to the filing date of this quarterly report (the Evaluation Date); and



(c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;



5. The registrants
other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent function):



(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and



(b) any fraud, whether or not material, that
involves management or other employees who have a significant role in the registrants internal controls; and



6. The registrants other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.



|                  
|------------------
|Date: May 14, 2002
|                  



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I, Michael C. Kearney, certify
that:



1. I have reviewed this quarterly report on Form 10-Q of
Hydril Company;



2. Based on my knowledge, this quarterly report
does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered
by this quarterly report;



3. Based on my knowledge, the
financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this quarterly report;



4. The registrants other certifying
officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:



(a) designed such disclosure controls and procedures to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;



(b) evaluated the effectiveness of the registrants disclosure controls and procedures as of a date
within 90 days prior to the filing date of this quarterly report (the Evaluation Date); and



(c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;



5. The registrants
other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent function):



(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and



(b) any fraud, whether or not material, that
involves management or other employees who have a significant role in the registrants internal controls; and



6. The registrants other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.



|                  
|------------------
|Date: May 14, 2002
|                  



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